Q2FY11 results. As per our expectations, Dishman registered weak Q2FY11 results; we estimate recovery from Q3FY11. Revenue slid 2.1% yoy; however, adjusted net profit fell a sharp 32.3% yoy due to a 570-bp fall in EBITDA margin owing to absence of contract-research business.

n       Highlights. Revenue drop was driven by 6.8% fall in the marketable molecules (MM) and 0.5% decrease in the CRAMS businesses. CRAMS fell due to postponement of a few contract-research projects that would be executed in the coming quarters. This also resulted in lower margins, which would recover in the coming quarters.

n       Outlook. We believe that the worst is now over and recovery should occur from Q3FY11 on the back of: i) the stabilising base CRAMS business, ii) commercialisation of the high potential (HIPO) facility and iii) beginning of API supply (patented product) to an EU major in Q4FY11.

n       Lower estimates. We lower our FY11-13e revenue 3-6% owing to postponement of a few contract research deals and less revenue from the MM business. We lower PAT 13.7%, 6.3% and 7.7% for FY11e, FY12e and FY13e respectively.

n       Valuation and risks. We maintain Buy, given recovery in business from Q3FY11 and attractive valuations. However, we lower our target price to `246 from `258 due to our revision in estimates. Risk: Delay in execution of CRAMS contracts.